There are hardly a few people in the world who are unfamiliar with the word Pepsi. Words such as cola or soda have almost become synonymous with it. Pepsi is arguably the most famous soft-drink consumed by billions all over the world. And the company responsible behind this success is one of the world market giants; PEPSICO, Inc.
According to Andreas Penzkofer (2007), the company came into existence in 1965, when the Pepsi-cola company acquired the snack food company called Frito-Lay. The company has started to expand itself overseas since the nineties. Pepsico Incorporated is a Fortune 500 American multinational corporation. Its headquarters are based in Purchase, New York. It is a company which has marketing and manufacturing interests in a wide variety of products ranging from carbonated and non-carbonated beverages, salty, sweet and cereal based snacks, juices etcetera. Some of the major brands owned by the company are Quaker Oats, Gatorade, Frito-Lay, Tropicana, Copella, Mountain Dew, and 7 Up.
According to Lawrence Dietz (1973), the perspective of the company is to increase the value of the share-holders investment. The company plans to do this by achieving growth in sales, controlling the costs and intelligent investment of resources. The company believes that their commercial success is dependent upon offering good quality and value to their consumers and customers, making available products that are safe, wholesome, and economically efficient while providing fair returns on investments to their investors by maintaining high levels of integrity.
ORGANISATIONAL STRUCTURE AND CULTURE
Pepsico operates in all the six major continents of the world namely Asia, Africa, Australia, North America, South America and Europe. Their operations are further broken down amongst countries in these continents. The inter-organisation structure of the company has many sub-divisions. Their products are produced and bottled at the manufacturing plant, delivered to the suppliers by the distributors, the suppliers sell it to the retailers and finally to the consumers. These supply-chains in different countries are controlled by one main headquarter.
According to Andreas Penzkofer (2007), the aim of the company is to manage supply ingredients and maintain purified water supply to ensure quality and availability to produce the products. Ensure availability of the best technology and quick storage and inventory processes to maintain freshness and quality. Determine the demand by past sales and future marketing. Also ensure proper packaging, maintain quick local distribution and meet any new demands or competition with products and consumer needs.
Andreas Penzkofer (2007), also states that the company’s mission is to become the world’s best consumer products company. Its aim is to improve on the financial returns to the investors as it provides opportunities of growth and development to its employees. It is also concerned about preserving the environment and has designed a separate set of goals especially in its favour. This can be observed from the replacement of can holders with plastic ring connectors which snap when the cans are removed; thereby reducing the risk of entanglement for wildlife. Pepsico also aims at diversifying its workforce so as to have a better understanding of different cultures. This has led the company to win many awards as well as being ranked at the 9th position by the fortune magazine as being the best company for minorities.
According to Lawrence Dietz (1973), Pepsico, Inc. is one of the leading consumer product companies in the world having many of the world’s most important and valuable trademarks. It is the second largest soft-drink business having a 21 percent share of the carbonated soft-drink market in the world and 29 percent in the United States. Three of its major soft-drink brands Pepsi-cola, Mountain Dew and Diet Pepsi are amongst the top-ten soft-drinks in the U.S. market. The company has also spread itself substantially in the world snacks market by introducing a company division known as Frito-Lay. It has a 40 percent world market share in salty snacks and 56 percent in the United States. It is nine times the size of its closest competitor in the U.S. and sells nine of the top-ten snack chip brands in the supermarket channel some of which include lays, Doritos, ruffles and Chee-tos. Frito-Lay is responsible for generating more than 60 percent of Pepsico’s net-sales and more than two-thirds of the parent company’s operating profits. The company also has a third division called Tropicana Products, Inc., which is the world leader in juice sales and occupies a strong 41 percent of the U.S. chilled orange juice market. On a global scale, Pepsico owns 16 brands that generate more than 500 million dollars in sales each year, ten of which are responsible for generating more than 1 billion dollars annually. Pepsico acquires around 35 percent of its retail sales outside the United States, with Pepsi-cola brands marketed in about 160 countries, Frito-Lay brands marketed in more than 40 and Tropicana brands in around 50 countries.
According to Richard Goodman (2009), Pepsico has managed to device a successful business model which stresses importance on three key factors. Structural and operational advantages, successfully pilot the company through uncertain times and making strategic investments for future growth. Pepsico aims at meeting challenges and investing for the future by providing value to customers and consumers, having an excellent market strategy, investing in research and development and innovation. By achieving these factors, the company will be able to retain customers. The company also aims at effectively managing price gaps, bringing in global advances in beverage pack sizes, activating the consumer by holding contests, working out capital benefits for the customers as well as the consumers, control prices of products around the world market, appealing to local tastes, adapting to local customs thereby achieving healthy and consistent performance.
The global visibility of Pepsico can be observed from the sheer number of countries its products are consumed in. From the market share section above, it can be seen that Pepsi-cola brands are marketed in 160 countries, Frito-Lay brands marketed in more than 40 and Tropicana brands in around 50 countries. Although Pepsico is an American Multinational corporation, India and Europe are of two of its biggest markets outside of the United States.
Pepsico has formed partnerships with many products it does not own but in order to distribute and market them with its own products. Some of these products include, Starbucks iced coffee, Lipton original iced tea, Ben and Jerry’s milkshake etcetera. Also some of Pepsico’s business alliances include Pepsico Quaker Chewy teaming up with Afterschool Alliance and Miranda Cosgrove to Call Attention to the Importance of Afterschool Programs, Pepsi-Cola North America Beverages and Ocean Spray Strategic Alliance to Include Additional Juice and Juice Drinks, Oxford Health Alliance and PepsiCo Foundation implemented Community Interventions etcetera. (Source: www.pepsico.com, date taken: 08/08/2010)
The Coca-Cola Company
As we all know, Coca-cola or Coke as it is popularly known, and Pepsi have been competing with each other since the longest possible times. Even as kids, we used to have advertisements on television showing us to choose one over the other. As the years pass by and as the companies seem to expand themselves more and more, their rivalry to attain market dominance seems to grow further more.
According to Pat Watters (1978), the Coca-Cola Company is basically a non-alcoholic beverage producing company. It is also responsible for manufacturing, marketing and distributing concentrates and syrups which are used to produce these beverages. The Coca-Cola Company has their beverages sold in more than 200 countries worldwide. Their headquarters is in Atlanta, Georgia. The company owns more than 500 brands of non-alcoholic beverages which primarily include sparkling beverages. But they also manufacture still beverages like enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks.
Royal Crown Company, Inc
The Royal-Crown Company, Inc is a 50 billion dollar company which manufactures and sells concentrates that are used in the production of soft-drinks. These soft-drinks are then sold locally and internationally to independent licensed bottlers.
RC cola is the company’s leading brand and is ranked as the third largest cola brands after Pepsi and Coke. Some of the other brands which the company owns are Diet RC Cola, Diet Rite Cola, Lockjaw, Upper 10 and kick. (Source: www.rccola.com, Date accessed: 09/08/2010)
COMPETITIVE ANALYSIS GRID
SWOT Analysis for PepsiCo:
SWOT Analysis signifies the evaluation of the strengths, weaknesses, opportunities and threats possessed and faced by a particular company, organization or institution. According to Pahl, Richter (2009), SWOT Analysis is beneficial and a crucial tool for decision-making and figuring dependencies between a company and its environment since subjective opinions are replaced by proactive and constructive thinking.
The SWOT Analysis for PepsiCo is as follows:
PepsiCo has a strong brand reputation in the global market due to its presence of over 120 years.
It has had a significantly increasing market share over the years due to the launch of new products like Pepsi Max and other ideas. (Bachmeier, 2009)
Its place has been determined and positioned strongly with regard to profits, sales and customer loyalty due to its creativity and effectiveness.
PepsiCo boasts of a strong product line with a variety and diverse range of products.
It faces no cash deficit and hence has huge advertising budgets to strengthen its market position.
PepsiCo depends largely on the US market for its revenues. According to Plunkett (2009), around 29% of PepsiCo’s total net revenue is derived only from PepsiCo Beverages North America and its total market revenue dependent on US alone exceeds 50%. This may prove to be detrimental in the constantly changing economic conditions.
Some of the PepsiCo products lack uniformity in their brand names.
Experts have cited health hazards in the consumption of PepsiCo products due to high fat and sugar contents.
The image of PepsiCo has been at stake due to incidents like the exploding of Pepsi cans in 2007 followed by salmonella contamination in Pepsico’s product – Aunt Jemima pancake and waffle mix. (Clark, 2008)
PepsiCo has been working to broaden its product base substantially. In 2005, it bought General Mills’ stake of the largest European snack food firm ‘Snack Ventures Europe’. In addition, PepsiCo acquired the German juice maker Punica Getraenke. (Penzkofer, 2007)
PepsiCo operates through its four subsidiaries – PepsiCo Beverages North America (PBNA), PepsiCo International (PI), Quaker Foods North America (QFNA) and Frito-Lay North America (FLNA) in almost 200 countries. (Penzkofer, 2007)
With 153,000 employees, the company had total net revenue of $ 29,261 million in 2005 and was ranked at place 62 of the Fortune 500 Ranking of the largest companies in the United States. (Norton, Porter, 2010)
PepsiCo has gradually been developing noncarbonated drinks and healthy products, attracting more customers.
PepsiCo faces considerable threats due to strong competitors like The Coca-Cola Company, Nestle, Dr. Pepper Snapple Group etcetera.
Incidents like those of contaminations and pesticide residues found in PepsiCo products have caused substantial brand damage to the company, especially in large emerging markets like India.
PepsiCo has been in a vulnerable position in the recent past due to labour problems. To illustrate, there was a month long strike at Frito-Lay India, a part of PepsiCo India Holdings Limited, beginning in August 2008 due to a dispute between the workers’ union and the company management. (Source: http://www.expressindia.com/latest-news/strike-at-pepsis-channo-plant-ends/363190/ , Date accessed: 12.08.2010)
Stagnancy acts as a threat for the company since the food and beverages industry has reached its maturity and there are hardly any avenues that remain unexplored.
PROPOSED BUSINESS, INFORMATION SYSTEMS AND INFORMATION TECHNOLOGY STRATEGIES FOR THE FUTURE
For future growth opportunities and profits, PepsiCo should try to carry out their business by introducing healthier products in the market. The company can achieve this by
Reducing the calories in the food products so that the consumption can be a healthy one.
The company can manipulate the market to control what people are eating and drinking.
Healthy options should be made available to all
The company should undergo a change from inside and transform their reputation as a manufacturer of healthy products which essentially gives nutritional value.
In the years to come, the company should engage its business in providing fruits, vegetables and grains. The company as a whole should respond to the changing consumer needs. Using the latest science and encouraging positive nutrition is the need of the hour as the masses become health conscious day by day. The company needs to be reformulating itself and become innovative by making use of the next generation technology. The company can further merge itself with healthier brands of products. (Source: www.Pepsico.com, Date accessed: 10/08/2010)
Information Systems and Information Technology Strategy
Buckingham et al. (1987), defines an information system to be a system that can assemble, store, process and deliver information relevant to an organisation. This is done in a way that the information is available and useful to anyone who wants to use it, including managers, staff, clients and citizens. An information system is a human activity system which may or may not involve the use of computer systems.
A good information system strategy according to Guy Fitzgerald (2002), for a huge consumer food products and beverages company like PepsiCo to carry out its business for future growth and profits would be:
To precisely document the requirements necessary for a good information system: Here, the users should be able to specify their system requirements or the system developers should be able to investigate and analyse user requirements so that the information system will meet the needs of the users.
Efficiently monitor the progress by providing an orderly method of development: For a huge company like PepsiCo, controlling its large-scale projects is not easy. If the projects fail to meet the deadline, they can have serious cost and other repercussions for the company. Providing check-points and specific stages should make sure that the project planning procedures are applied effectively.
Provision for the company’s information system should have a suitable time limit and an acceptable cost.
The documentation of the system should be properly preserved and also the system should be easy to maintain: This is extremely important as in a company like Pepsico, modifications to the information systems is inevitable due to the amount of changes taking place in the company and its environment.
The system should be able to make the best use of the techniques and tools that are already available.
The system should be liked by the people who are affected with the system such as the company stakeholders. The stake holders of the company may include clients, managers, auditors and users. If the system is liked by them, it is most likely to be used and bring success to the company.
A successful information system should also make effective use of information technology by using the available tools and techniques. An effective use of information technology would involve:
All staff having standard desktop tools. They should have access to email, Internet and Intranet.
IT infrastructure should be continuously upgraded as allowed by the company’s resources and budget.
Systems and networks at the company’s head-quarters and in the field should be standardised and centrally managed.
A centralised team should provide IT assistance to staff and a wide range of IT training.
The company should make use ERP systems at the head-quarters.
For information and knowledge management, the company should implement document management system.
Making use of such business, information system and information technology strategies would help the company stay competitive in the market in the future.
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